March Update: Malaysia
Cleanrooms, HVAC, and electrification.
For much of the last six months, Malaysia was a less attractive market to fish in because of generally higher valuations relative to Singapore.
Two things have changed:
Some names have pulled back this year.
Malaysia announced a value up programme in the style of the Japanese, Korean and Singaporean initiatives we have heard much about.
The ‘MY Value Up’ programme will be introduced to prioritise value creation, bolster financial performance and raise visibility of public listed companies (PLCs) in Malaysia, a nod to the success of factor-based investing that has bolstered stock valuation in South Korea, Singapore and Japan.
Under the programme, the Securities Commission of Malaysia (SC) “will adopt a tailored approach, emphasising value creation and measurable performance based on the different PLC archetypes with the objective of raising the visibility of quality companies, catalysing re-ratings (where warranted) and establishing structured recovery pathways for laggards”, the SC said in the fourth Capital Market Masterplan (CMP4), which spans 2026-2030, launched on Monday.
Theres also specific talk about focusing on small caps:
[The Capital Market Masterplan] would encourage asset managers to develop new investment strategies focused on local markets and SMEs, helping channel institutional capital into domestic growth sectors.
Fundamentals are strong:
Malaysia’s GDP grew 5.2% last year.
Malaysia announced her largest ever budget this year, and there was a healthy amount of spend on infrastructure, particularly roads, water, rail, digital connectivity, electrification, and solar.
The data center market in Johor has previously led us to two ideas: Wasion Holdings and XMH Holdings.
Malaysia has an impressive place in the semiconductor supply chain. Just to name a few examples, Malaysia is home to:
Approximately 13% of the world’s OSAT output.
Intel’s assembly and test hub, useful for tracking their advanced packaging ramp.
Broadcom’s global distribution hub.
20% of Coherent’s headcount, notably in the high volume 640k sq feet plant in the state of Perak.
25% of Infineon’s headcount, larger than Germany, in both backend and frontend operations.
AT&S’s largest single plant investment, in Kulim.
MKSI has a new 500k sq ft factory in Penang.
Lam Research is aggressively shifting manufacturing from the US to Asia with an 80/20 Asia/US target. Lam’s Penang facility is its largest.
All of the above is driving a thriving ecosystem of suppliers who themselves need cleanrooms.
Citrini had this to say about Malaysia in January this year:
We have two ideas in Malaysia below that benefit from tailwinds in cleanrooms, data centers and electrification, and which may benefit from the new value up programme.